Canadian Plastics

Global car sales strong in early 2016: report

Report also predicts an extended U.S. auto cycle.

March 14, 2016   Canadian Plastics

Global car sales were solid in the early months of 2016, a new report by Scotiabank says, providing a much more upbeat assessment of global economic conditions than the fear that gripped financial markets through mid-February.

The advance was broad-based, with only Brazil and Russia continuing to be a source of weakness.

According to the latest Global Auto Report from Scotiabank, the sales acceleration has been building momentum since last summer and suggests that for many households, strengthening job creation and low energy prices are trumping the gloom that has spread across global financial markets in recent months.

“Asia led the increase in global sales in January,” the report said. “Volumes advanced 7% year-over-year, driven by the fourth consecutive double-digit advance in China. Western Europe was the second-best performing market in January, with volumes increasing at a double-digit pace in six countries – one-third of all countries in the region.”

Volumes in Canada jumped to a new peak for February, the report said, while U.S. purchases climbed to a sixteen-year high. “Sales in Canada totalled an annualized 1.99 million units last month, up from 1.97 million in January and a full-year total of 1.90 million in 2015,” Scotiabank said. “Light trucks, especially CUVs, led the way in both countries with solid double-digit gains. These vehicles now garner nearly 70% of the Canadian market, up from less than 50% as recently as 2009. While light trucks have historically been dominant in Western Canada, Ontario and the other large non-resource exporting provinces are leading the gain this year, with volumes bolstered by robust fleet activity.”

The Auto Report also predicted that the U.S. auto cycle is in the midst of an extended upcycle, with gains fueled by a strong labour market, rising replacement demand, healthy household balance sheets, as well as favourable demographics. “Auto industry earnings and margins are currently at record highs in North America, in contrast to the previous decade when zero percent financing led to slumping industry profitability,” the report said. “Automakers with the largest market share in the U.S. reported that pre-tax earnings jumped to US$3,500 per vehicle last year, 70% above the average of the previous five years.”

Improved affordability makes it easier for Americans to continue to replace their aging vehicles and will buoy volumes further, Scotiabank said. “Replacement demand accounts for 80% of overall U.S. sales and will continue to drive sales higher,” the report noted. “The average age of the U.S. fleet stands at a record 11.5 years, and we estimate that more than 40% of the U.S fleet is currently at least 12 years old, with many to be replaced in coming years. While some households will opt to exchange their aging cars and trucks for a pre-owned model, most will travel to new vehicle dealerships for their new automobile.”


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